What is the Right Mortgage for you?

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Low-Ratio Mortgage A Low-Ratio Mortgage is usually one where the down payment is equal to 25% or more of the property’s value. A low-ratio mortgage does not normally require mortgage loan insurance. High-Ratio Mortgage A High-Ratio Mortgage is one where the borrower is contributing less than 25% of the value of the property as the down payment. High-Ratio Mortgages must be insured through Canada Mortgage and Housing Corporation (CMHC) or Genworth Financial, the two mortgage insurance companies in Canada. The insurance premium can be paid up front or it can be added to the mortgage amount. Insurance premiums are calculated based on the mortgage amount. Open Mortgage An Open Mortgage allows the mortgagor to prepay all or part of the principle amount at any time without penalty. Open Mortgages usually have shorter terms of six months to one year. Interest rates on Open Mortgages are typically higher than on Closed Mortgages with similar terms. Closed Mortgage Closed Mortgages do not provide for payout before maturity. A lender may permit a payout under certain circumstances but will levy a penalty for doing so. Fixed Rate Mortgage The interest rate is determined and locked in for the term of the mortgage. Lenders often offer different prepayment options allowing for quicker repayment of the mortgage and for partial or full repayment of the mortgage. Variable Rate Mortgage (VRM)/ Adjustable Rate Mortgage (ARM) This type of loan differs from a fixed rate mortgage in that the interest rate charged on the loan may be changed during the term of the mortgage. Generally, these loans are initially set up like a standard loan, based on the current interest rate. The loan is reviewed at specified intervals and if the market interest rate has changed, changing either the size of the payment or the length of the amortization period (or a combination of both) alters the mortgage repayment plan. Capped rate variable mortgages are variable rate mortgages in which the lending institution has set a ‘capped’ limit. This means that the interest rate of the mortgage will fluctuate as the prime fluctuates but the lender has a set rate and guarantees that the borrower will not have to pay interest at a rate higher than that limit.

 

[smilingmeng]

What is the Right Mortgage for you?

Low-Ratio Mortgage
A Low-Ratio Mortgage is usually one where the down payment is equal to 25% or more of the property’s value. A low-ratio mortgage does not normally require mortgage loan insurance. High-Ratio Mortgage

A High-Ratio Mortgage
is one where the borrower is contributing less than 25% of the value of the property as the down payment. High-Ratio Mortgages must be insured through Canada Mortgage and Housing Corporation (CMHC) or Genworth Financial, the two mortgage insurance companies in Canada. The insurance premium can be paid up front or it can be added to the mortgage amount. Insurance premiums are calculated based on the mortgage amount.


Open Mortgage
An Open Mortgage allows the mortgagor to prepay all or part of the principle amount at any time without penalty. Open Mortgages usually have shorter terms of six months to one year. Interest rates on Open Mortgages are typically higher than on Closed Mortgages with similar terms.

Closed Mortgage

Closed Mortgages do not provide for payout before maturity. A lender may permit a payout under certain circumstances but will levy a penalty for doing so. Fixed Rate Mortgage The interest rate is determined and locked in for the term of the mortgage. Lenders often offer different prepayment options allowing for quicker repayment of the mortgage and for partial or full repayment of the mortgage.


Variable Rate Mortgage (VRM)/ Adjustable Rate Mortgage (ARM)

This type of loan differs from a fixed rate mortgage in that the interest rate charged on the loan may be changed during the term of the mortgage. Generally, these loans are initially set up like a standard loan, based on the current interest rate. The loan is reviewed at specified intervals and if the market interest rate has changed, changing either the size of the payment or the length of the amortization period (or a combination of both) alters the mortgage repayment plan.

Capped rate variable mortgages

are variable rate mortgages in which the lending institution has set a ‘capped’ limit. This means that the interest rate of the mortgage will fluctuate as the prime fluctuates but the lender has a set rate and guarantees that the borrower will not have to pay interest at a rate higher than that limit.